In seeking out the perfect distribution system for supermarket food service, retailers are discovering that there probably isn't one.
The only constant, said retailers interviewed by SN, is that there is no sure-fire answer, no one pathway to success.
Instead, they said, they are finding they have to rely on a mixture of methods of distribution and delivery to the stores, employing a variety of systems to meet the needs of both the products and the consumers.
Some retailers rely completely on outside vendors to provide their total programs. Others find specialty producers to provide certain stockkeeping units. Still others use a combination of in-store production, often coupled with the retailer's central kitchen or commissary operation, with vendor-supplied items to meld into one cohesive food-service statement.
This hodgepodge of means and methods is being juggled partly because of the emerging status of the supermarket fresh-meals business; and partly because the existing players in the various stages of the distribution pipeline have often been unable to come to common terms about how the pipeline should work.
"Logistically, you still have to look at product, packaging, pricing and shelf life," said consultant Jim Reisenburger, a principal in Design Associates, Rochester, N.Y., a high-profile former retailer. "Manufacturers, retailers and distributors are still passing each other in the dark."
Retail prepared-foods and deli executives for the most part shared the opinion that a mosaic of systems and sources is probably the most workable approach for now, as they carve out, redefine and redirect their food-service niche.
"It's more of a quilt, with pieces and parts put together," confirmed Bobby Ukrop, president and chief operating officer of Ukrop's Super Markets, Richmond, Va. "We use a lot of different sources: distributor, wholesaler and our own system from our commissary. It's a real potpourri.
Most of the retailers contacted by SN said that movement of fresh food-service items through the retail warehouse distribution system is all but nil.
In the great majority of cases, they said, fresh refrigerated items destined for the prepared-meal arena within the supermarket are wending their way along alternate routes, such as traditional food-service distributors or manufacturers' direct-store-delivery systems.
"We have been going through a food-service distributor for over four years," said George Timms, director of deli for Minyard Food Stores, Coppell, Texas. "Our distributor has one person dedicated to our account. And it handles all of our deli products, too, in addition to the food-service items."
At Minyard stores, that business encompasses the cold deli, sandwiches, meats and cheeses and pizza, as well as the items destined for the hot cases in select units and the items required by the corporate chefs at three sites.
As Timms explained the routine, orders are placed two times per week via a Telzon system, a system built around a telephone/computer linkage. The distributor furnishes a dedicated buyer, who is thoroughly educated on what makes the supermarket deli tick.
This team relationship has paid off for both the retailer and the distributor, said Timms. "We made a commitment to giving them as much of our business as we can," he said.
"With the volume we do, our relationship has become a two-way street. You can't expect high service levels and good pricing if you're ordering $50 here and $35 there."
According to the prepared-foods executive at one Midwest retail chain, more than 70% of its deli/prepared-foods SKU count is seeing the inside of a grocery distribution center. For one thing, given the small volume of the business, the warehouse wouldn't slot the items necessary to run the food-service operations, he explained. ....
At Ukrop's, only a select number of items move through the food-service distribution channel, at least at present.
"They understand that business and how to handle the items," said Ukrop. "There are not the high-turn items for a traditional wholesaler to work with, but food service is growing and the lines are blurring.
"A whole bunch of variables depend on what product is right," Ukrop also said. "You have to figure out what you want, what the goal is." For his chain, that means stepping up to the freshness plate. Chicken, for example, is delivered every day in an effort to maintain a 24-hour order-to-shelf cycle for chicken items. Sixty percent of what will be sold tomorrow is being made up by 4 p.m. today.
Meanwhile, as the variety of available alternatives for product and distribution sources grows for supermarkets, the systems coming into play increasingly include cross docking and direct store delivery, with an eye toward efficiencies.
"The retailers who are succeeding are using cross docking and working with suppliers to find joint carriers, consolidation and back hauling," said consultant Reisenburger. "Because of the time and expense, the type of products retailers need for food-service operations cannot go into the warehouse system."
Cold-chain issues and food-safety concerns have additionally spurred many retailers into cross-docking situations.
"You have to have an understanding of quality and what it takes to deliver ingredients, and how handling of product affects quality," said Ukrop. "You have to be serious about cold-chain systems. Without them, you cannot have quality.
"Cross docking enables us to have a higher level of freshness," Ukrop added. "You may not be always able to hit price points, however."
To a large extent, retail decisions about what distribution systems to use can depend upon the product itself. At Ukrop's, for example, systems were needed for items sourced from outside suppliers; and the chain also had to construct an internal distribution system for its own commissary.
The chain built the commissary because "We couldn't have chefs in every store," Ukrop said. "Customers shop in three or four stores; there would be inconsistency. And from a food-safety and labor perspective, there would be huge inefficiencies producing in-store."
Another compelling reason for Ukrop's to open its own commissary was that more than 80% of the 25-unit chain's food-service items are sold prepackaged and chilled. Ukrop said that the packaging labor had to be expunged from the units so associates could spend their time talking to customers about the food.
For another supermarket operator, Jewel Food Stores in Melrose Park, Ill., using a variety of product sources feeding through the system has also come in quite handy. According to an official with the chain, it is a natural take-off on food-service operators' practices.
"Food service has traditionally utilized a combination of products," said Nancy Chagares, vice president for bakery, Chef's Kitchen and floral merchandising at Jewel-Osco, Melrose Park, Ill."You have to utilize delivered fresh product, delivered frozen items for thaw and sell, and freshly prepared in-store items. At Jewel-Osco this is driven by our rotisserie program. By mixing items you are better able to manage at the store level, utilize labor efficiently and maximize profitability."
"There are a dozen more suppliers that will produce what is needed. Retailers have to work with several manufacturers."
Jewel-Osco has initiated a program with a local airline catering company to distribute sandwiches and salads to 112 of the chain's units.
"We needed to find a company with expertise in making and delivering sandwiches and salads," said Chagares.
"We are using this to springboard into meal solutions," she said. "We hope to grow the business with [the caterer]. The products answer the fresh equation."
The system is in operation seven days per week, and the items carry a 24-hour shelf life. Jewel places orders in the morning; items are assembled overnight and delivered to the units by 8 the next morning.
By using outsiders to weed out inefficiencies, retailers hope they can then turn their attention at the store level to satisfying customers.
"We have to gain the confidence of the customer; this is determined by what manufacturers offer retailers," said Reisenburger. "Instead of asking for co-op money or slotting fees, the manufacturer and retailers must jointly budget for shrink, demos and labor for, say, the first period.
"The way things are now, each is looking for instant gratification, rather than putting a program in place. You have to plant today and harvest tomorrow."
However, despite their growing reliance upon the food-service side of the industry for at least parts of the fresh-meals distribution puzzle, retailers are not viewing the food-service players as the ultimate or only sources.
Their traditional grocery suppliers, especially the larger companies, can and should have roles to play in retailers' fresh-meals programs, retailers said. However, that is proving more problematic in the execution than some of the other alternatives.
"As long as the traditional manufacturer is broken into two divisions, food service and retail, there will be a huge lack of a unified approach on how retailers should be called on," said Scott Miller, Miller Consulting, Houston, a former retail food-service executive with Randalls Food Markets, also in Houston.
Miller cited this widespread internal division in how many manufacturers go to market as the main reason supermarket operators are being shut out from a whole range of products -- simply because the wrong side of the business is calling on them.
"There is a disconnect between what's being offered [to retail] and what is available," Miller said.
But inevitably, more food-service distributors will get in line to make meaningful presentations to chains, as retailers get deeper into food service and grocery manufacturers continue to break down the walls inside their own companies between the two divisions.
"It is an evolutionary process," said Miller. He said he believes manufacturers need first to rethink how they go to market. "Grocery food service is different than restaurant food service. Grocery operators will not change how they do business to fit food service."